Why Bubbles are Good | Byrne Hobart
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What we talk about in the book is, no, there are actually some things where they don't just get built sooner because there was a bubble. The only reason they exist was a bubble. The only reason that they exist was that for a brief period in time, so many people were so confident about some very specific change in the way the world works, some deployment of particular technologies or changes in organizational structure. They were so confident in this that everyone knew that if they make a bet that only makes sense if this actually happens,

That bet has a much higher chance of paying off, but only if you make that bet right now. Welcome to Bankless, where today we explore the frontier of why bubbles are good. This is particularly relevant in crypto, I would say. This is how to get started, how to get better, and how to front run the opportunity. I'm Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become bankless. Our guest today wrote a book on why bubbles are good. Basically, the thesis is we are in an era of money.

Great stagnation, productivity, the economy, our culture of risk aversion has made it such that we are underperforming relative to where we need to be. And he says, bubbles, speculative booms are actually the way out.

A lot of material here I think is super relevant to crypto. I think this audience is going to be a little bit more accepting of some of the theses presented by Byrne in his book. The idea that bubbles are actually conduits for progress. Not all bubbles, but some bubbles. And I think we all live through these experiences going through the many crypto cycles. It's weird to live through one bubble, I would say. But in crypto, we live through bubbles every four years. So we are intimately aware of how these things work and what they do and how they impact progress.

But Byrne also advocates for like, well, not all bubbles are good. Some bubbles are actually downstream of the fact that society is stagnating. We didn't get to talk about it in the episode with Byrne, but there's a website called WTF Happened in 1971. And I think Byrne is approaching the same idea from a different perspective. It's like society has really started to stagnate. In his book, he gives three reasons why.

But I'll just leave that for the book and for the listener. So just a really interesting conversation, connecting the idea of bubbles as a lens for progress while also society becoming more risk averse.

And maybe that kind of illustrates the social gap between crypto people and the rest of society that I think we all kind of know exists.

and positioning ourselves to take advantage of that. Bern actually says FOMO is good. You should embrace the FOMO. And so you'll have to hear what he means there on that. Guys, we'll get right to the episode. But before we do, we want to thank the sponsors that made this possible, including our recommended exchange, the place where if you get a little FOMO, you should go buy some crypto. This is Kraken. Go create an account today.

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Bankless Nation, very excited to introduce you to Bern Hobart. He's a financial analyst. He's a writer. He's well known for his newsletter. It's called The Diff. I love this. It's one of my favorite publications on the internet right now. It covers tech, trends, economics. It's perfect for the well-rounded generalist. I'm a bit more of a crypto native, but when I want to be a generalist, I go read The Diff. He's written this book along with his co-author. It's a book called

boom. We're going to talk about that today. Bern, welcome to Bankless. Hey, great to be here. So I think we're going to spend most of this podcast talking about your book, talking about the thesis of it, because that's super interesting, very applicable to crypto. Maybe you could tell us why crypto bubbles are good in the course of today's episode. But before we do...

I want to get maybe your crypto background. You have some crypto pedigree, I believe. Am I understanding correctly that once upon a time you worked for Balaji Srinivasan back in, you know, before, let's say, the Bankless podcast existed sometime in the 2015 time range. Can you tell us your background on crypto, like what you've done inside of that? Yeah, yeah, absolutely. So I had paid kind of vague attention to crypto adjacent things for a really long time.

I was actually looking back at some of Nick Szabo's blog posts on Bitgold and realized that I'd actually left comments in like the 2008 timeframe. The specific thing that I was commenting about was I was complaining that if you have a

competing to solve puzzles, and that's how you allocate your currency. Well, that just leads to this really wasteful race to spend as much compute as possible, etc. So yeah, I was a little bit early to the crypto mining environmental impact thesis. And I guess one of the things I hadn't thought about is, you know, there's an environmental impact to other stuff and, you know, to the fiat system as well. Although I think that argument is also, it is a little bit fuzzy. Like you still, it's not like the need for all security goes away and like,

It's not like the demand for physical infrastructure that supports abstract financial infrastructure all goes away, etc. So I still think it's an interesting question to ask whether or not that's worth it, etc. But yeah, so I've been paying attention to crypto for a while. I did indeed work at 21.co, which was just a really, really fun experience. Like lots of incredibly smart people who are looking at this technology and asking questions.

saying, basically, we read the white paper and fell in love, and now we should figure out how this actually gets deployed widely and how it gets used and think through all that stuff. And so the company, it was this combination of economic think tank and technological think tank and also sort of growth hacking lab of trying to figure out all the different ways to extend the crypto ecosystem. I was not there for an incredibly long time, so I did miss some of the story, but I did see a lot of stuff in my short tenure there.

Before that, I'd worked at a hedge fund and then decided to move back to New York and ended up working at some companies that do research, the data intensive research for hedge funds. So yeah, I've kind of straddled the tech and finance worlds for a while. Maybe we'll talk about crypto and Bitcoin a little bit later because there's an entire chapter in your book, you're talking about Bitcoin and talking about it from the perspective of why the Bitcoin bubble, and I guess repeated bubbles, have been actually good, have been one of the things that you point to as kind of the solution, the way out of our stagnation.

I want to ask you this question too, while we're on the subject. Did you get Bitcoin the very first time you heard it? Or like, how long did it take to click for you? Because a lot of people, you know, miss it the first time or two, and it takes repeated exposure to really have it sink in. At what moment did you recognize Bitcoin for that kind of the innovation and the productive bubble that it actually is?

So I think there was a period, and I guess this ties into the bubble question, because there was a period where I thought this is a really interesting idea. And it's very cool that you can create the design for a decentralized currency. And then the next question is, how do you make it an actual currency? Because if you have a system where all the rails are in place and you can transfer these tokens around at

and anyone can participate, and you could be very, very certain that you don't need some central trusted intermediary, like you have total control, et cetera. All of that is really, really cool, and then the question is, what are these worth, and what can you buy with them? And so for a while, I thought it was an interesting proof of concept, and I guess my basic attitude in retrospect was,

If somebody does something with this, that would be pretty neat. And what I didn't realize was that the value could be just an emergent property of people interacting on the network. First, they're sort of sending crypto around for fun and as a proof of concept. And then you have the famous pizza transaction. But what the pizza transaction at least did was...

It sets some kind of anchor where there is some kind of real exchange rate and you are actually using the crypto system to interact with the rest of the economy in some useful way. Like, obviously, the retrospective dollar cost of that pizza purchase was really, really high. But also the transaction cost of just everyone had to figure out, OK, how do I actually send someone this money? Like, do I have the address right? You know, lots of nerve wracking things. And

there has been this process where on one end, the actual tokens get more valuable, which means there are more transactions that you could conceive of doing with them. But also there's just a much better interface for actually transacting with tokens. So I didn't buy any crypto for a long time. And actually the first time I bought any was when I realized that Y Combinator had funded Coinbase. And I thought, look,

The crypto ecosystem is going to select for people who either are like really technological, but maybe don't know a lot about economics or like have very peculiar ideas about economics or people who are just very ideological, like people who are libertarians and anarcho-capitalists, like they like the idea that this is money without central banking. And so that's why they're going to do it. And also, if you have a new bearer instrument that can be easily hidden, easily transferred, et cetera, it's going to attract a lot of criminals. And I felt like

If I'm just some guy on my laptop looking for a way to buy Bitcoin, the criminals are looking for me. And it's going to be very, very straightforward for me to transfer the fiat money to someone and then will I actually get crypto? Maybe, maybe not. So yeah, for a while, I just, I didn't look into it because I just wasn't sure that there was any straightforward way for me to buy any. And then once Coinbase existed...

my basic thought process was Y Combinator will be humiliated if this is a scam. They probably have the resources to make customers whole. Like, I think at the time that I signed up for Coinbase, the daily transfer limit was 100 USD. Wow. At least for me. Early days. So I was like, you know, they can't take that much of my money. So yeah, I bought a little bit then and then kind of forgot about it. And then...

I actually was, so this was like late 2012, I bought some and then I was at a hedge fund. And at one point, someone in the hedge fund sent this email around saying, what is Bitcoin? And he had this chart. And the chart was a year to date chart where it started around the price that I'd paid. And then it had gone up like 10x in the ensuing couple months.

And so that was pretty exciting. That was pretty fun. It was an immaterial amount of money, but it was still cool to see number go up. And so, yeah, I spent some more time on it. There was a lot of drama in the crypto world. So 2012 to 2013, you started to have price appreciation. You had the whole Silk Road news cycle. And Silk Road was a proof of concept of...

people will actually use this. They will actually use this to participate in the economy. It turned out it was participating in not the illicit legal economy, a different part of the economy, but still. And it was actually a use case where you definitely don't trust the person on the other side of that transaction. Like that whole industry, the whole supply chain is defined by the fact that no one trusts anyone and there's no recourse other than just, you know, writing off your losses or doing something really horrible. Like there, you can't go to court over a bad drug deal. And

So Bitcoin was actually a pretty good tool for that. I think the US dollar, like physical dollars, are still a better tool if you are in the drug business. There's still a way better way to transfer money around, preserve your purchasing power. And of course, there's not an audit trail for where did this particular $100 bill go, where has it been, etc. Whereas with Bitcoin, yeah, you can audit it right back to when it was first mined.

So yeah, I had been paying attention to it for a while, and I think looking at that evolution, I think one way to look at it was you could say, okay, someone invented this technology. It was a concept looking for a use case. The use case turned out to be buying and selling illegal drugs. The U.S. government does not like that. They're not going to let people do that. Therefore, it was a fun experiment, and then that's the end. But

The other hypothesis was, well, no, there's more of a liquid market here and people are actually using this. And, you know, it went down. I remember looking at the intraday chart the day that Silk Road got seized and saying, wait, it went down, but it didn't go to zero. It wasn't like the only reason people owned crypto was to buy and sell drugs, even though like you can look back at really, really early charts of Bitcoin. And I think there's one year where you can actually see this rally coming into Burning Man and then

that crypto actually dropped after Burning Man. Yeah, which that also is, that is like one of the indicators of just, it's a pretty early, pretty primitive financial system. Like real world swings in supply and demand for particular products actually affect the exchange rate. And there are real world antecedents to that. So there's this story I've never bothered to check because it's too good to check, but there was apparently a weather vane in front of the Bank of England yesterday.

And they knew that if the wind is blowing in a way that is favorable to ships coming in, that you actually need to inject a little bit more liquidity in the financial system. And then when the wind is blowing the other way, fewer cargo is coming in. So you don't actually need as much liquidity in the system. So this is a case where literally how strong the wind is blowing is

is determining the day-to-day trade balance between, say, England and the Netherlands, and that tells the central bank what to do. And since it's the central bank, you know, under a more fiat-y system, they can just inject liquidity into the local financial system. And crypto at the time did not have that. And that was another thing that just looking at the evolution of crypto really shocked me was, so we're zooming way ahead now, but in March of 2020,

I had actually in 2019, I'd been doing some more quanti research into the question of what kind of asset is Bitcoin? Like at that point, we'd established that crypto is an asset class. Bitcoin is kind of the blue chip of this asset class. And people incorporate it into financial portfolios that have other just normal person financial assets like treasury bonds and S&P index funds and whatever. And so I was asking myself, like, is this

In one sense, it's a risk-on asset. Like, it's a cool technology thing, and so maybe it's like a hyper-levered version of the NASDAQ. And when people want to take risk, they put some more money into NASDAQ and way more money into crypto. And then my other hypothesis was, no, this is an asset where you have a fixed supply, it's easy to move around...

And so you know that pretty much no matter how bad things get, as long as you and your loved ones and a USB drive can get exfiltrated from the country, then some of your assets are safe. They're as safe as they're going to be. And so maybe crypto is actually the most apocalyptic asset, and you should compare it to things like gold and the Swiss franc and the yen and other things where when people panic, that's what they end up buying more of.

And so I looked at a bunch of correlations and what I found was just noise. Like there wasn't anything it really correlated with. There wasn't any way to really make sense of the price movements in light of other stuff. And then I kind of set that aside as, okay, that's my understanding of crypto in a financial context is that it's this uncorrelated thing and that's

If you think it's going to be a major reserve asset, then the risk-adjusted returns – if you think 10 years from now, it's going to be part of a lot of the FX reserves of a lot of different countries, and maybe it starts to supplant gold, then it's a pretty good deal. And if you don't think so, then it's not.

And, you know, I looked at just what are the risk-adjusted returns that are different scenarios for timelines and probability of that happening, etc. And then March of 2020 happens and Bitcoin crashes along with everything else. And I was just really confused. I was like, why is it crashing? Like, shouldn't you be panicking and selling everything else you own and putting that money in crypto so you can fly off to, like, you know, be the last flight into New Zealand or smuggle yourself into some isolated place where you won't get sick and then, you know, one thing stabilizes, you reemerge.

So I kind of thought maybe crypto goes up during the most apocalyptic scenarios and it went way down. And that's when I realized that, no, there's actually a lot of leverage in the crypto ecosystem. Like this is already like the most volatile asset class that is an actual asset class and not a derivative on something else. And what do people do? They wanted to borrow against it and make it even more volatile. Hmm.

So I thought that was actually a notable evolution because when you look at the historical gold standard system, there are just not a lot of times and places where people are transacting primarily in physical gold. What's usually happening is that there are financial institutions. They have gold reserves. Those reserves are used to balance long-term trade and investment flows between countries.

But what people transact with day to day is some kind of token that is implicitly backed by that. And maybe it's fully backed, maybe it's partially backed, and you just trust that England is probably going to be around for a long time, that if the Bank of England doesn't have all your gold right now, they will eventually be able to have enough gold to redeem whatever thing you have. So you can still treat it as money good, money equivalent, and just way easier to transport, etc., even if it's not fully backed by gold. And so...

It started to look like the crypto ecosystem was developing some of that, but developing it in maybe more cycle-inducing way than other financial systems. Because what you typically see in a fiat system is both bankers and regulators realize that banks have this amazing privilege that they can essentially create money.

Or they can create something that is, as far as the average person is concerned, it is money. That's an incredibly valuable privilege. And you sort of want to make sure that they are using that correctly, because if you don't, then the responsibility of your entire banking system is determined by whatever the least responsible bank is, because they're the one who creates the most credit. And so they're the ones who define how much credit gets created.

And crypto just doesn't have any way to do that. Like there is because it's decentralized and permissionless, etc. Like you can't just say the maximum leverage for a DeFi lending protocol is X. And, you know, we're not allowing it if it's above X like that.

The protocol doesn't know. The protocol doesn't care. And the underlying rails don't know. They don't care. And so you actually have a system where, by default, credit is going to be very pro-cyclical. So a lot of people will want to make loans and a lot of people want to borrow when cryptoassets are appreciating. That creates a feedback loop. This is like a classic Hyman Minsky thing. So Hyman Minsky, very interesting economist, said some things that were absolutely brilliant, some things I strongly disagree with. But his description of credit-driven financial cycles is brilliant.

I think, really powerful and particularly powerful for people in the crypto world. Because what he says is that there is this cycle where when money is tight, almost any investment you can make actually has really good returns. There just isn't any money to go around to make those investments. And over time, people start making investments. Those investments do well, even though the credit was expensive. And lenders start to realize that, hey, we're making pretty good returns. And we're

we can lend more and we'll continue to make good returns and maybe the rates at which they lend start to go down. And so they're making less money in percentage terms, but they're willing to lend a lot more. So in absolute profit terms, they're doing okay. But while they're doing that, what they're also doing is just increasing the amount of credit in the economy. So they're increasing people's buying power. And if that has a feedback loop into real world supply and demand, what happens is it actually causes economic growth. And that economic growth means that the loans that you underwrote

in a weaker economy, they're retroactively better loans because now people have more money to spend, they're more creditworthy, etc. And what could eventually happen is that you start to have this overshoot where people are borrowing money for things that really only make sense if the economy continues to grow and that credit expansion is the only reason the economy is continuing to grow. And so you have a bunch of loans where it's the exact inverse of what happened early on. Like early on, the loans looked risky because the economy was weak. They

the economy gets better, and so the loans turn out to be less risky. But now, the loans look less risky only because the economy is really strong, and it's only strong because there's a lot of credit flowing through it. And at some point, somebody just doesn't want to make the next loan, or there is some hiccup somewhere in the system, and you start to see the whole process unwind, and you find out that these last loans...

were underwritten based on assumptions that only made sense given that expansion of credit that did not actually happen. So this is, you know, another way to tell the story of the housing crisis, for example, is that the marginal buyer of a house in 2006, very likely that their income, like the reason that they were not buying a house in 2005 was that they couldn't get the loan and

Maybe they work in construction. Maybe they are a mortgage broker themselves. They're in some part of the country that is seeing lots of economic growth that is disproportionately driven by residential real estate investment. So like you have a lot of these loans where they look good on paper, like this person could actually pay back the money they've borrowed, but only because lots and lots of loans are being made.

And then when that reverses, I mean, it was a very painful reversal. It overshoots. And then we kind of get back to the beginning. So the annoying thing with the crypto cycle is that at that cyclical peak, a lot of the crypto economy activity is just speculation. Like there's a lot of money in helping people gamble on crypto. There's a lot of money in making markets in various weird crypto assets or in operating exchanges or in making large margin loans or offering derivatives, etc.,

And what that tends to do is it actually tends to suck a lot of the attention away from fundamental improvements in crypto and from user facing like real economy facing versus financial economy facing technologies like that stuff gets crowded out. It's simply less lucrative. In 2021, you don't want to be doing a remittance business that is going to help people more cost effective.

send money back home. You want to be doing the business where instead of that person working a job in a rich country, sending money back home to their family, like you make a lot more money from that person if they have a job in the US and they put all of their profits into Binance or FTX or something and are just constantly trading. At the time, it was NFTs really.

Yeah, yeah, the NFTs thing also went crazy. So crypto, it has these really extreme cycles. Now a lot of those cycles involve some credit creation and then credit destruction. So it ends up being just a really interesting lab for looking at how bubbles happen and how they work. And the thing underlying all these bubbles, like the assets themselves, have this very bubble-like dynamic, which is just intrinsic to currencies, which is that

You don't buy currencies based on your expectation of future cash flows. You really buy currencies because you know someone else will buy them from you later on, and you have confidence in what that price will be.

That sounds like a really speculative thing. Like if I said, you know, I'm buying Tesla shares, not because I know anything about electric vehicles or whatever, but because I know someone else is going to pay 5% more from them next week. That's very, very bubbly kind of talk. But with currencies, like that is why I have US dollars is that I know that people will treat the dollar as valuable. It's like currencies are priced. They're not valued, right? Yeah. That's the difference here. Yeah.

Yeah, and you can sort of view taxation as this sort of way that the government either runs an ongoing buy and burn program in crypto terms or just steps in to always be the greater fool. You may not think dollars are valuable, but there is this organization out there where once a year they give you this amazing deal, which is give us these worthless pieces of paper and you don't have to go to jail. What a great deal. I can't believe this person is paying such an irrationally high price for these pieces of paper, but hey, I'll take it.

I think it's a great trade. And yeah, crypto doesn't have that. So it has to like float around based on the sentiment of people transacting in crypto. And that just, you know, much like gold, like gold has value in for exactly the same reason that people think that someone else will buy their gold. And in particular, that when the economy goes crazy and when the stock market crashes or when there's inflation,

a wave of money printing, there's high inflation, like the gold is still going to be there. You know, one ounce of gold is still one ounce of gold. And so it preserves your purchasing power in cases like that. One interesting thing though, Bernd, on that is like, there is an element where crypto networks are somewhat like the US government with a taxation system in that block space itself is

is denominated in the crypto asset. So to the extent that there is blocks-based demand, that creates some reservation demand for the underlying cryptocurrency asset. And there are some economic designs, for instance, in Ethereum, where actually a portion of that, you taxation call it, is burnt.

We see that to a lesser extent in Bitcoin, right? There's not as much, you know, exogenous block space demand in Bitcoin. It's all because of Bitcoin. But you also see this design in crypto networks as well, kind of like thinking as block space is kind of the thing that you buy and the taxation system of the crypto network. Yeah. So the economics of block space get really interesting because

What you can do with block space is you can basically free ride on the total value of the network and the total value of all these transactions and basically say that as long as the specific transaction I'm encoding within this does not have some independent value that swamps the value of the overall, say, Ethereum ecosystem, it's not worth it to do something that weakens Ethereum in order to get after my transaction. So it does have value in that sense. But

It's just very, very hard to put a dollar price on that block space. Like you have to sort of look at what is the global demand for very economically significant transactions. And that's a deliberately vague term because that significance has to exist in the head of whoever's doing the transaction and then try to figure out, OK, what would someone pay for that to be hosted on this blockchain versus some other blockchain versus just anything?

We're going to do this transaction. You know, we're going to actually hire some lawyers. We're going to put together a word document. It's going to describe things in legal language. And if we don't like the outcome, we'll take each other to court. And it's just, it's really like you have many, many orders of magnitude of potential value for that. So it is something, but it's also very hard to put a value on. And then

Another issue with that is that if you are trying to design an economic system, if you do have to tax something, one of the questions to ask is, what is the least damaging thing to tax? And what are some disproportionately damaging things to tax? And I have the kind of semi-ideological view that taxing transactions that enable price discovery is a generally value-destructive thing. And

Unfortunately, it is inevitable. Like, the main thing that a modern country taxes is personal income or personal consumption, you know, some combination of those. And both of those are price discovery functions. You know, income is the market's attempt to figure out what you personally are worth and to figure out which company –

you are best suited to work for by determining which one is the high bidder. And that's a very economically valuable thing to do. That is finding people's life's work and then rewarding them appropriately for their contributions to society. So, you know, maybe that is the most important thing the economy does. And so if you put a tax on that, you are saying we're going to accept that this gets done a little bit worse than it otherwise would be because we

we do need the revenue for other stuff. It ends up being a trade-off just worth taking. And basically every civilization ends up taking that trade-off, but it does have a cost. And so if you look at block space as the underlying intrinsic value of a crypto ecosystem, you are saying that we're going to wait our time

implicit taxation of participants in the system, even more so towards things that entail price discovery. And that's maybe not ideal. Like you could actually potentially view Ethereum in particular and Bitcoin in a hypothetical different world than the one we live in today as kind of analogous to the China model, where part of the government's revenue source is that

It owns a lot of property, and it owns the right to decide what gets used for what purposes. And by taking a farm outside of a city and saying, this can now be industrial property, you get a large markup on it, and you can fund a lot of the state's operations by just slowly selling off those assets and buying.

As long as you're like liquidating a percentage of your assets that roughly matches the long term price appreciation of those assets, you do have an effectively unlimited runway to just start with a large base of assets and slowly sell it off in order to subsidize positive externalities. So there's the hypothetical version of this world where Satoshi says, I am going to sell off, I

I don't know, 5% of my stash every year. And I'm donating that to core developers, and I'm making angel investments in crypto companies that have good use cases, etc. And Satoshi didn't do that. And we talk about this a little bit in the book, like the fact that Satoshi was there for a while and then very much split and is no longer participating, or at least not participating under the Satoshi moniker, that was very important to Bitcoin's development. But

I think that that is a different version of the future where you don't have direct taxation. You have basically quasi-inflationary taxation of there is someone dumping this asset on the market periodically, but they are dumping it on the market in order to spend the money on things that create positive externalities. And so as long as those externalities exceed the market impact of the sales, then it creates net value for the entire ecosystem. And this is the model that I think a lot of – we'll call them altcoins –

There are other words for these, but like a lot of them try to have something like that. But I think it's just very hard for them to calibrate how much do you sell? At what pace do you sell? And what do you actually invest in that makes this a winning ecosystem? Those are just really, really hard questions to answer. Bernd, in your book, there's an entire chapter dedicated to the story of Bitcoin and the bubble of the crypto world. And it's just a really strong anecdote to, I think,

prove or just illustrate some of your larger points that I really want to actually kind of take a step back and define. Your book is called Boom. It's on, I'll call it, there's like two entrees in your book. There's the story of bubbles and the story of stagnation. And you also bridge these two things together. I think in the crypto world, we live for bubbles. Bubbles are fun for us. We enjoy them. Money's flying around. Money's changing homes. It's kind of, yeah, it's where like all of the excitement is really made in the crypto world.

And then also previously on the Bankless podcast, we've touched on the recent like accelerationist movement coming out of Silicon Valley and Beth Jesus. So I think our audience is maybe primed for these two different components, but no guest so far has really been able to like

link these two things together and talk about the thesis that you've talked about in your boom. So maybe we can kind of like just set up the context of which you've written boom and kind of prepare our listeners for the two entrees that we're going to bring them. Okay. Yeah. So I guess one way to do it is set up like thesis, antithesis, and synthesis. So the standard

way to think about bubbles, the way that I thought about bubbles from the first time that I heard about what happened in the 1920s or like I started paying attention to financial markets in the 1990s and then was paying very close attention as that whole thing unwound. So the initial thesis is, okay, sometimes investors go pretty crazy. Sometimes they stop thinking about the fundamentals of what they're investing in and start thinking about other people's behavior and

And as they do that, once everyone imagines that there is someone slightly dumber than them who's just waiting in the wings to buy shares of Broadcast.com or buy my large, massive levered position in RCA in the summer of 1929, once everyone is operating on the assumption that someone else is going to step in and buy, then at some point you just run out of dumb people. Everyone is fully tapped out. They've all bought as much as they're going to buy. They're all borrowing a ton of money. And then a stiff breeze can just knock the market over.

And then there's this antithesis point to this, which is, hey, if we look at the long-term economic impact of these bubbles, what we actually see is that some of this is like it's actually kind of a Robin Hood thing going on. You have these really rich people who invest a ton of money in some project or set of projects, and they do lose a lot of their money, but things get built. So look at, say, railroad bubbles in the 19th century. A lot of people lost a lot of money speculating railroad stocks, but

The US has a really, really good freight rail network. It is very, very cheap. If you're transporting things over land, if you can transport them along railroad, you are paying a fraction of the cost of transporting them on a truck. And trucks are also pretty efficient. So, you know, it's a big deal. The UK similarly had a very well-developed railroad network, and that ended up being a nice subsidy to their industrialization. So they had railway bubbles in a smallish one in the 30s that felt like a big one at the time, and then a

really big one in the 1840s. And that one, you know, they were investing a substantial chunk of GDP. Like I think it was like single digit chunk of GDP each year in just building new railways. And what that meant was as their economy further industrialized, as they were importing more raw materials from the rest of the world and manufacturing them, building finished goods domestically, and then shipping those to the rest of the world again to keep their trade system in balance, they

having an internal system of railroads was actually a really, really good way to have an efficient manufacturing footprint within that country. You could get the coal where it needs to be. You could get equipment where it needs to be. You could get the iron to the steel mill. You could get the steel to the factory that's turning it into whatever the end product is. Like this all ended up being really valuable.

But when you think about that, OK, so maybe just from the perspective of economic it like minimizing long term economic inequality, maybe having these periodic booms where the bust tends to hit the richest people a little bit harder because they just have more money to lose. And then the infrastructure is beneficial to everybody. Maybe that's good. On the other hand,

Yeah.

dug up all that coal and chopped down all those trees and built this thing. And, you know, a lot of people worked really hard and some of them probably died because 19th century, no workplace safety was not quite up to modern standards. And yeah, then we ended up with just a railroad to nowhere. So maybe that was pointless. Maybe we should have done a slow roll on this. But then,

What we talk about in the book is, no, there are actually some things where they don't just get built sooner because there was a bubble. The only reason they exist was a bubble. The only reason that they exist was that for a brief period in time, so many people were so confident about some very specific change in the way the world works, some deployment of particular technologies or changes in organizational structure. They were so confident in this that everyone knew that if they make a bet that only makes sense if this actually happens.

that bet has a much higher chance of paying off, but only if you make that bet right now. So look at AI right now. A zero to one bet. Yeah. So AI right now is a fantastic example where NVIDIA is improving their chips at a very, very rapid pace. And it would be completely irresponsible for them if there weren't a use case, if they're just hoping that, hey,

Someone out there will create a game that is so demanding on graphics that no matter how powerful our GPU is, there will be demand for it. That would be a little bit irresponsible. But in this case, they know that there's basically a market for flops and that if they build more efficient GPUs, there's absolutely demand for them. And then at the labs, what do they think? They think, well...

This model, like the scale of the model we're considering is so absolutely vast, it's just completely computationally infeasible. Like if you described the amount of compute that is needed to train, say, Lama 3.1, if you had described that to someone 20 years ago, you would have been explaining to them why AI will never happen. It just requires a wildly unrealistic amount of compute.

But of course, we know that that amount of compute is actually realistic because of NVIDIA's efforts. So each side is basically coasting on the assumption that, coasting in a pretty aggressive way, but they're coasting on the assumption that the other side is actually going to build the thing that makes the thing they're building worthwhile.

And so you can have this equilibrium where Blackwell doesn't get built or doesn't get built for a really long time and where Lama 3.1 does not get built or does not get built for a really long time but probably just doesn't get built at all. That's one stable equilibrium. And the other equilibrium is they both get built and neither would really exist without the demand entailed by the other.

So when you have a situation like that, you can basically radically advance along one branch of the tech tree. And what you're really trying to do is figure out, OK, what are the real world fundamental limitations? So maybe the limitation is you can train really, really powerful AI models until you run out of good, fresh data, like high quality tokens. And once you hit that point, maybe you can't train anymore. But we didn't have any way of even speculating about that until we started actually making the big bets.

And I don't know for sure that that is the case. I think there are some interesting things going on with synthetic data right now that can maybe not completely demolish the data wall, but maybe help us gradually scale it. But that is the general model, is that when you have a boom, you have a lot of capital flowing into a given sector, and it's based on a specific vision of what could be different. Then everyone who is working on some subproject within that, it's actually a less risky project, conditional on everyone else taking big risks. Yeah.

Which is just, it's a really cool thing to think about. It means that bubbles are a coordination mechanism. They are a way to tell people that this is the thing to work on. This is where to apply your skills. And also kind of like one, another way that we like to think about it, and we talk a little bit about this in the book, is there's this idea of industry clusters where

there are particular cities you should be in if you want to be in a particular field. So if you want to work in finance, it's a really good idea to be in New York. If you want to get into movies, you probably want to go to LA. Like if your dream is to work in this industry, you don't want to work in like the third or fourth or fifth best city. Like movies do get made in Atlanta, but it,

It's probably not a great idea to bet everything on your film career by moving to Atlanta and getting an office job. Like, you probably want to move to LA, wait tables, do auditions, etc. And maybe it doesn't work out, but that's the place where you find out whether or not you've actually got what it takes. And a bubble is, it's exactly like that. It is one of those industrial clusters, but it's a cluster in time rather than in space. Yeah.

We're saying this is the time when everyone who cares about this thing needs to be building and needs to be building something that is adjacent to things that are already getting built. And you need to just sort of have this faith that you don't actually know what everyone's product roadmap is. You don't know what their plans are. So you don't know for sure if people are building the thing you think is the right thing, but you don't have the freedom to wait and figure it out. By the time you know exactly what else is getting built,

Someone else has probably built the thing that you would have. And this should change how you think about some aspects of bubbles. Like there's people talk about bubbles being driven by fear of missing out by FOMO. But our view in the book is if you actually have skills that are relevant to a particular bubble and that bubble starts,

missing out is the thing you should fear. It's a legitimate fear. That should actually be just existentially terrifying for you because it's a real fear. Yeah. Yeah. Like sometimes you look at what's going on in the world and you're like, I was basically put on this earth to be participating in this thing right now. Are you going to do the second best or third best thing? Hopefully not. Hopefully you do the thing that now is the time to do it.

And of course, it's daunting. And of course, it feels terrifying because like bubbles, they feel like bubbles for a lot of the duration of the bubble. So people started talking about a dot-com bubble in 1995, and they had no idea how crazy things would get. And people were talking about AI being overhyped. Like there were companies...

going public and having AI-related names and AI-related tickers pre-ChatGPT. They knew it was kind of a theme. They knew investors kind of liked it. They knew that Google had been talking for a couple of years on investor calls about how they're an AI company. And there were these periodic stories of a group of Stanford grad students would just take the work they were doing for their thesis, and they'd be like, well, this isn't a thesis. Now it's a startup. And suddenly, the startup gets acquired for tens of millions of dollars.

And that's a lot better than even, you know, the offer you get from wrapping up your PhD and trying to get a job at a big tech company. So like there were already bubbly things well before the part that we now think of as the true bubble. Right. Okay. So that's, I'll call it the first entree of your book. And I think our listeners are more or less primed to really lean into this idea of like, oh, like I understand how bubbles, the bubbles in the crypto space advance the crypto space. Like they can probably resonate with that. I personally resonate with that.

And then the other part of your book that I want to introduce is just this idea that also crypto people tend to really lean into risk. Personally, my own anecdote for getting into crypto was I was faced with I could either go to physical therapy school, get a doctorate, or I could come into crypto. And when I was faced with like six years of school, a bunch of student debt to go down this like very carved and known path.

to get like a very carved and known like career path out the other end of it. Or I could go into this like unknown, this crypto future, no academia, no certification, lots of risk, but like lots of fun. And in your book, you illustrate that there's this like growing societal risk aversion that

venturing out on your own unknown, building, innovating, doing something new, doing something that is like, you know, not what the typical societal path is. And so in the crypto world, I think we're all kind of identified. There's like this resistance towards accreditation, but, and there's this acceptance of, you know, the high school dropout, the college dropout. But then like normal society is just like, no, here's your normal nine to five path.

You work at this one job, you become partner, that's your key to success. And you make this big argument that there's this slowing progress, there's a growing stagnation in society. Maybe you can start to introduce this other half of your book to really kind of round out this picture here. Yeah, it's funny when Tobias and I were first bouncing around ideas for the book,

At first, we weren't even really going to talk about the stagnation thesis at all because we kind of assumed it's sort of in the water. And I think for a lot of people in some parts of the tech world and parts of the policy world, it definitely is. And then we did realize that this is something that we want to make the case for this. I think there are some really good cases that have been made for this. Tyler Cowen's great stagnation theory.

really introduced this idea to a lot of people, including me, that if you look at long-term charts of productivity growth, you see things that make sense for a while, which is in a pre-modern economy, there's minimal productivity growth. And it is very unlikely that you, if you are just, you know, a farmer in the year 1080, like,

the economic world that you're born in is very similar to the economic world that you die in. There might be some slight improvements somewhere else, but it's entirely possible that you could live your entire life at that time and just never encounter some technology that was invented within your lifetime. Even though that was happening, it was happening in different places and kind of gradually. And then...

As you get closer to the industrial revolution, you do start to see these long-term uplifts in productivity that we actually, we get better at farming, we start manufacturing more things, we start to get better at manufacturing. And manufacturing has these feedback loops where if you are better at building very precise machine tools, you can build a lot of other things, including the next generation of even more precise machine tools. So it tends to recursively improve through a lot of human effort and a lot of capital investment, a lot of risk, et cetera. But it does happen.

And then there's this, in retrospect, pretty crazy period in the mid-20th century where in the U.S., economic output controlling for hours worked and controlling for the total capital invested in the economy, output hours growing like 2% a year. What is crazy? That with no additional material inputs, people are just getting more and more productive.

And then after about 1970, that slows to 1% a year. There's a brief blip in the 90s and early 2000s, and then things kind of degrade again. And then there's potentially another productivity inflection happening right now. We'll have to see, because these are very long-term trends. Like, Great Stagnation was written about 40 years after that productivity fall off. People were talking about it a bit earlier.

in, say, the 1980s. I think it was in the 80s where the line was coined that you can see the computer revolution everywhere except in the productivity statistics. But there was this slowdown, and one explanation for it is that there was some low-hanging fruit, that things like

electricity and the internal combustion engine and the transistor. These are generally useful technologies. They can be massively improved over time and that when we discover them, we get a very long period of productivity growth. We have to redraw a lot of economic assumptions in order to fully take advantage of that. So to benefit from industrialization, one of the things you have to do is switch your country from being mostly

with a few cities where people actually don't live especially good lives, like the disease burden's pretty high and quality of life is pretty low, but you at least get to do something other than farm all day. You have to switch from that to a world where actually the default is urbanization and where the default job is not growing food or doing things involving food, but is actually producing other goods. And then we've slowly transitioned to more of a services-oriented world. We're all service sector people, and that's what a lot of the economy is today. But

Those transitions take a long time. And even if the technology exists and works in basically its final form, figuring out everything you have to rearrange in order to get the maximum value from it takes a long time. So electrification, for example, factories, people started using electric motors a couple decades before most factories were fully electrified. And it turned out that you need to just re-arrange

redesign a lot of things about factories, including their physical layout. So if you have a pre-electricity factory, it has some form of mechanical power, and there's like a central unit that is providing all that mechanical power, and everything is just connected with ropes and pulleys to that central power source. And so you have a finite fixed amount of power, and you're trying to design everything around that. And that means that if you want to add anything that consumes power, you have to take something out. Mm-hmm.

And that anytime you replace any one thing, you have to rebalance everything else. It also means that your factory, it's ideal for it to be a very tall building and to have multiple floors where people are using different pieces of equipment that are all connected to the central power source. And

And that's just in some ways a pretty inefficient way to design things. You also have to have your factory near a power source. Once you can electrify, you can put your factory just anywhere that you can hook it up to the grid and it can expand in two dimensions, which means you don't have to redesign it every time you expand things. Like if you had some tool in your factory and there's an upgraded version of that tool, you can just unplug the old one, install the new one and re-design.

Your electricity bill maybe goes up, but you don't have to redesign everything else. And if you had two assembly lines and you realize there's enough demand for a third one, you don't have to find a new building, build an entire new factory. You can just plop down the additional assembly line next to it. So this changes a lot of things. Like it changes how companies think about

retaining earnings. And you can actually see this in some of the dividend payout statistics over time. It used to be that equity was basically like the most junior creditor. People did not actually expect stocks to appreciate over time. They expected them to have higher returns than bonds, but the higher returns would come in the form of a dividend yield that exceeded the bond yield.

And the reason the dividend yield exceeded the bond yield was if the company starts losing money, the dividend yield goes away and the bondholders still get paid. So you were sort of this junior, junior claimant on the company's profits. And the assumption was those profits fluctuate around a midpoint and maybe your company does well and it tends to pay a high dividend and maybe it does badly and pays a low dividend or no dividend at all. But it doesn't just grow indefinitely. But

Once your factories can be pretty of more arbitrary sizes and once they can expand incrementally and once you can buy new equipment within an existing factory and not have quite the same overhead for actually getting utility out of it, then companies start to retain earnings and they start to just grow over time. And that changes the entire nature of the organization. It actually, one of the things it means is that you can hire people and tell them that your job right now is pretty boring. You're an individual contributor, but you're

Our headcount is only going up and the responsibilities are only growing in magnitude and the complexity of our process, it's only going to get more complex over time. So there's room for you as just the new hire on the Ford assembly line. There's actually room for you to move up within the company. Ford is going to get bigger and what we do is going to get more complicated and what we do is going to get more lucrative. And so you actually have some upside. It's not just...

you have a job, that's your job, and one day you will die or just be too sick to work. It's like, you have a job, but maybe in five years you're supervising a bunch of people with your old job, and maybe in 10 years you're designing processes for all the supervisors, and maybe in 20 or 30 or 40 years you're actually running the company.

So very different kind of value proposition for the entire question of, do I work for a company or do I stay home on the family farm or do I start my own little independent shop doing something? And so getting all of those social changes worked through society, like getting it to the point where parents actually have good advice for their kids and can tell them, here are the perks of working for a big company. Here are the perks of working for a small company. Here are the perks of starting your own thing. That takes a lot of time. And that is part of that productivity growth. Part of that productivity growth is just,

So matching people to the right opportunities and adapting that matching process to changes in the scope of those opportunities and changes and how well we understand them. And so you had talked earlier about this idea of Christian people don't want to follow this standard path of you go to the right schools, you take the right tests, you get the right job, everyone knows it's the right job, and you just follow this track until you're done. Right.

For one thing, those tracks, they're always based on a previous generation's experience of what went well. So they always tend to overshoot. They over-index on basically whatever the best jobs were when your parents were first getting a job. And sometimes those things change kind of slowly, but sometimes they change pretty fast and it's a little bit disorienting. I think if you step outside of that and you say that whenever there's an obvious path, whenever it's a low-risk path, the aggregate risk in the economy hasn't gone down because of the existence of big companies. Right.

the way that risk is experienced has changed. And sometimes what happens is big companies will riff on a different Tyler Cowen book. Tyler Cowen wrote this book called Big Business, and it is all about how big companies are actually pretty great. And he makes the point that they are more law-abiding because they just have more at risk. Like if a mom and pop store, I don't know, doesn't pay someone overtime, just pays them their usual hourly wage. Like that's not front page news. But if

A Walmart manager somewhere in the vast Walmart ecosystem decides to pull a trick like that. The headline is not, you know, Bob, who manages a store out there in Oregon, underpaid one guy by $30 this shift. No, the actual story is...

Walmart, big company you know and love, is mistreating its workers. It's cheating them. So big companies just, they have more at risk if they violate the rules. So they tend to be a little bit more sticklers for those rules. And they do just get more output out of each worker. So when you work for a big company, you are producing more output per hour on average than you would if you were at a small company. And the company has kind of set itself up so that it captures a lot of the upside from that. And it gives you a low risk slice of the returns. But

it is also truncating some of your personal upside. And for a lot of people, that's a perfectly good deal. Like I think for a lot of people, there's no question of like, if I could have some chance of 10Xing my net worth and also some chance of having to sleep on a friend's couch because I literally can't pay rent anywhere

Like a lot of people would say, no, I'm actually – I don't want to take this bet. Like this is a bad bet. Like I'm much less excited by the prospect of great wealth than I am just appalled by the prospect of losing everything. And then a lot of people who are perfectly willing to take that bet, yeah, they end up in crypto. They end up starting companies. They end up doing other high-risk stuff. So like the amount of risk does tend to get preserved in the economy over long periods, but it does get shifted around. You always want to ask with those low-risk questions.

Like, one, are you giving up a lot of upside? But two, have you traded the short-term lumpiness of sometimes you – like, for me, I write a newsletter and do a lot of other stuff, investing in other stuff. But, like, let's say I'm considering do I write my own newsletter or do I work for a big media company writing a newsletter for them?

One way to think about that risk is I can't really get fired from my newsletter. I get a little fractionally fired every single day because people are constantly unsubscribing, resubscribing, etc. But there's no circumstance in which I'd suddenly lose all of my income. But it's entirely possible for a newsletter to get laid off at a big company.

And they don't really have visibility into that. Sometimes it is a strategy change that happens many steps away in the org chart. You have no visibility into it. Like you're doing your job just fine. You're still creating wealth for the company. Maybe there's like some internal political power struggle and someone, you know, you happen to be a pawn who gets sacrificed as part of that. You still have risk and the risk is just harder to underwrite in that case.

So, yeah, there's a lot of things to think about with just proper attitudes towards risk. And I think the really proper meta attitude towards risk is to always ask, who's on the other side of this transaction? What are they benefiting from when they transact with me? And am I looking at the full distribution or am I looking at the narrow slice of the distribution that makes this particular opportunity seem more promising and more fruitful? Yeah.

And of course, risk-seeking people have exactly the same problem. If you look at the people who go to Y Combinator, very, very few of them say, my dream is to do a strategic exit where my preferred shareholders get their 1x preference. I don't get anything except an earn-out at a big company. No one's going into it to get that. The people are going into it to build generational companies.

I think for a lot of them, even building a unicorn and taking it public, like having a billion-dollar company, that is in some sense a failure because they felt like they wanted to be the next Mark Zuckerberg and not the next mid-sized to big-ish software business that is just big enough to be public but not a business everyone would recognize the name of.

So yeah, in that case, what people are focusing on when they think about the risk is what is the very far right tailed outcome. And that is a very interesting outcome to think about, but is not the outcome most people will experience. And so when you are thinking of those high risk bets, one of the things that I like to think about is like, would you be satisfied with how you spent your days if you did not actually get that amazing outcome?

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You know, there's obviously a material difference between exiting as a billionaire and exiting as a member of like the Silicon Valley lower middle class of you still have a mortgage and you still have to think about what job you do next. But you can still at least feel like you did something useful with your time and that you accomplished something even if you didn't get the full financial reward you hoped for. Uniswap Labs is making history with the largest bug bounty ever. Fifteen and a half million dollars for critical bugs found in Uniswap V4. This isn't just any update. Uniswap V4 is built with

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I think people do have a challenge kind of like assessing risk. And of course, everyone's risk preference varies. But like on this topic that David mentioned of the stagnation problem, right? So I think you illustrate in your book why there's a current stagnation problem in the US and you bring kind of the metrics to bear. So people aren't familiar with that argument, kind of the Peter Thiel argument of like, instead of flying cars, we have 140 characters, right? It's like, why has

productivity, at least in the physical world, diminished. You give a great case for this. But then I feel like you sort of extend on Tyler Cowen's idea in the book, The Great Stagnation. If I understand Tyler's argument in The Great Stagnation is basically like the low-hanging fruit's all been picked. We've developed all the land.

We got the, you know, like the easy tech, like electricity. We've educated the masses. So everyone's literate. And like we picked off all that low hanging fruit. And so like why stagnation is because there's no more low hanging fruit and also demographics. Right. So like aging population, you know, birth rates. I bet you would like cosign on some of those. But I think your argument for the stagnation problem really goes deeper than that.

And one that gets at, you know, kind of David's question, his decision of, you know, crypto or physical therapy is like as a culture, not just individuals, individuals, you know, preferences might vary when it comes to risk. But you make the argument that as a society, as a culture, we have kind of embraced safetyism.

and we no longer do the big, bold, ambitious things anymore. It's not just like an individual preference here, it's a societal preference that has really shifted. So you point to that, and I feel like that's how you extend Tyler's argument. You also talk about over-regulation and this like preference for incrementalism,

which, my God, we have seen overregulation and incrementalism in crypto, right? If you ask Gary Gensler, former SEC chair Gary Gensler, hopefully soon, he will say that we basically perfected securities law and we have all the classification for what an asset could be. We did that in the 1930s. Around the time the stapler was invented, we figured it out then. There's nothing new that could ever be invented. And so he's very much incrementing the securities law rather than trying to reimagine it. So we have that.

And then also the loss of hard money. You have an entire section on this, which I think will be very familiar to crypto listeners. Basically, we're on this Bretton Woods system.

We've moved into an era of financialization. And so like money doesn't have a cost. And if you look in terms of, you know, like America, the US as the dollars, the reserve currency of things like the Triffin dilemma. And so we've kind of like hollowed out all of our industrial building prowess. And we sort of outsource that now like China and other countries do that. And the lucrative career is to get into finance or go into Silicon Valley and sell people advertising basically is what we're doing. And so we've,

kind of hollowed out. I don't know if you want to weigh in on any of those, but it felt to me like it was a good encapsulation of the argument. But you guys had a unique take on the argument in Boom. Is there any of that that you want to kind of reflect on or expand upon? Yeah, yeah. So...

The kind of monetary question does go in a lot of really interesting directions. And one of the ways I like to think about it is that even though there's a lot of weirdness in our system, there are a lot of flaws in our system, but it also in some ways does work pretty well. And it's kind of surprising given how ad hoc and random it is. It's surprising that things kind of year to year do work. There are weird things.

that seem to be driven by liquidity sloshing around in unusual ways, but people are getting richer in the aggregate. A lot of stuff is working surprisingly well, but there is also, and we talk about this a lot, so in the Bretton Woods era, I think the first thing to say about this is it was part of that mid-century boldness. The Bretton Woods arrangements were basically

based on the idea that, yeah, if you put a bunch of smart people in a room, they can actually figure out this whole money thing and they can get it right. They can build a system that is internally consistent and coherent and allows countries to trade with one another, allows people to

store value in currency terms, like allows them to just not spend all of their time thinking about exchange rates and still get things done and still transact internationally. And for people who aren't familiar with what Byrne is talking about, Bretton Woods, you're talking about the post-World War II, Bretton Woods, basically the Allies won and everyone agreed, all the Allied, like the new order, the new economic order would be based on the US dollar and the US dollar would be backed by gold.

And that persisted in the 1940s until the end of Bretton Woods, which would be like when Nixon took the US dollar off the gold standard in the early 1970s. That's what you mean by Bretton Woods. Right. And then what turned out to happen after that was that the dollar actually became more central to the global financial system because it's

It was still the reserve asset that a lot of different countries had. It was still the currency that countries that – like, they each don't use the dollar, and neither one really wants the other one's currency. So the dollar is just a natural thing to default to. So when we eliminated this convertibility, what we also were able to eliminate was just a lot of limitations on global financial flows and prices.

Once those flows are pretty unlimited, there is a lot more trade. There's a lot more cross-border speculation, and you end up using U.S. dollar rails for a lot of it. But what we overall ended up with was an economy where there's this fundamental imbalance between

that the world does need reserve assets. And as different countries grow and as they globalize their economies, they do need to have access to more reserve assets. And the U.S. dollar is that default reserve asset. And so they need to accumulate U.S. dollars. But countries can't accumulate dollars-denominated assets in the aggregate without someone selling those assets. And

getting something for them. So we did basically create a system where the U.S. has to run persistent trade deficits. Basically, the dollar is our most competitive export. And as with any other country that has a really globally competitive export, whether it's like the Netherlands with natural gas or Saudi Arabia with oil, it just prices out a huge swath of other economic activity. It's really hard

in part because the U.S. is a rich country and we have expensive labor, so really, really hard to make t-shirts in America and sell them abroad. But also hard to make other things just because the global demand for the U.S. dollar, it makes dollar-denominated goods less competitive versus the dollar. And so it creates a system that, in one sense, it can last for a really long time because at

The more that the global financial system is denominated in dollars and the more that people overseas feel comfortable denominating their debts in dollars, the more there is this cushion of dollar demand that is just from servicing debts. There's a

really interesting Barry Eichengreen book about currencies and just maybe how global currencies work. That might be the one I'm thinking of. But what he talks about is that it took a couple decades for the U.S. dollar to actually supplant the British pound as the default global reserve asset.

And that happened much, much later. Like it happened kind of in burst, but like in the 1920s, you could say the pound was still the main thing, although it was losing share. And then World War II just messes with a lot of those numbers. Like you're looking at a very different time series then. And then by the post-war period, the dollar is clearly dominant. But the U.S. economy was probably producing more output than the British economy by the late 19th century. So there's this long period where America has a bigger economy.

but people are still using the pound over the dollar. And one reason for that was they'd been using the pound before. So like if you're a railroad in Argentina and it's 1880 and you're borrowing money internationally to grow, you of course are borrowing in pounds. London is the global financial center. So you have pound denominated debts. And that means that in 1900, even though the US dollar is a bigger financial asset, even though the US economy is more important, your debts are still denominated in pounds. And so you still need some pound denominated revenue. Yeah.

in order to service those debts. And the existence of large balance sheets and lots of external debt denominated in the home currency keeps a country's status as reserve currency around for longer than it otherwise would. And I think it's interesting to think about counterfactuals here where perhaps if Britain hadn't been the main economic loser of World War II, where they were just a lot more exposed to the economic costs of the war, Germany did a lot of fighting, but a lot of it was outside of Germany. And

By the time enemy armies were in Germany, the German army was retreating so fast that there just wasn't a lot of time for those opposing armies to absolutely ransack the German countryside and steal all of their stuff. But when Germany was conquering Europe, they actually were able to kind of at their leisure repatriate a lot of the valuable capital equipment and basically steal stuff from the countries they conquered. So...

Germany just did not get as thoroughly destroyed as a lot of other parts of Europe. And so they still had some manufacturing capacity after the war and were able to use that to juice their economic recovery. And then Britain, yeah, Britain had just invested a lot in building manufacturing capacity for weapons. A lot of their people had ended up serving in the military. And so you just had these catastrophic economic costs to actually doing that war. And so by the end of it, they just, they couldn't be the global creditor nation. They'd spent down their credit.

The U.S., though, again, a lot of American soldiers were fighting, but not on U.S. soil. So America's manufacturing capacity was pretty much untouched. And the U.S. did just have a comparative advantage in building stuff relative to deploying soldiers. Like that was the big Soviet thing was they had lots of people, not a lot of equipment. U.S. had to supply a lot of that equipment.

But what all of this amounted to was that, yeah, the U.S. was the center of gravity for the world economy after World War II. We had about half of the world's manufacturing capacity. So it did make sense that if someone was going to use money internationally, they probably needed to use dollars because they were probably buying from an American company.

Like you're buying your tractors from International Harvester and you're buying your cars and trucks from General Motors. Like, of course you need dollars. Of course you use dollars. And then over time you accumulate those dollars. Yeah. So the modern system is just, it's a really weird system because it is just what you get if you're

You had a system that was designed to be dollar-centric, and it was dollar-centric, and then you break the underlying assumptions of that system, but everyone still has their dollars, and they still have their dollar-denominated debts, and we kind of roll forward from there.

I don't know if that can actually last forever. And, you know, when I first heard about Bitcoin, I first started getting interested in Bitcoin and started thinking about, okay, it has these use cases and, you know, the seizure of Silk Road didn't kill it. And the collapse of the 2013 brief bubble didn't kill it. Like it's still around. Maybe it does become a reserve asset. So for a while I was pretty bullish. I was like, you compare this to gold, it's clearly better. Right.

and you maybe don't want to have a lot of assets just sitting around in dollars, like interest rates are not that high, maybe we will Bitcoinize pretty quickly. And as it happens, it actually accelerates. If there's a country that's looking at the profit and loss statement for their sovereign wealth fund, and they're like, wow, our dollar holdings are actually down 20% in real terms, and Bitcoin is up 20x in real terms, we better move the rest of our reserve to Bitcoin. Well, now Bitcoin's up 30x in real terms, because

a bunch of people are selling dollars and buying Bitcoin. So like, I thought that was like the arc and that's how it would happen. But for that to happen, you need Bitcoin rallies that get more explosive as they go up until they actually start reaching this equilibrium where people are treating Bitcoin as the reserve asset that you issue other credit instruments against because those credit instruments are more liquid and that the crypto flows are what

the long-term balance of trade between countries in the same way that gold did in the gold standard system. And it didn't actually seem like, even like the really crazy rallies, they didn't actually seem to encourage a bunch of sovereign wealth funds to do that. I think it is promising that larger, slower-moving institutions have moved into crypto. So, yeah,

crypto, you know, used to be just hackers and anarchists. And then it was hackers, anarchists, and like finance people who were investing their personal balance sheets, not their fund balance sheets. And then you started to see a few of the very risk-seeking funds get into it. And then, you know, in the part of the 2020 cycle was that you had companies like, okay, MicroStrategy, it is like a levered Bitcoin ETF that trades at a weird premium. So I guess not an ETF, it's a levered Bitcoin closed-end fund, trades at a monster premium that won't last forever. But you also had just companies like

insurance companies or like asset allocators would say, okay, you know, crypto, it's basis points, but we want to have a crypto allocation. And so you could have this gradual shift in that direction. But I find the hyper Bitcoinization thesis less and less plausible over time as it continues to not happen despite momentum being there.

And maybe it will at some point. But I also think that if that is the case, then maybe crypto, it is just a weird new asset class. Like it's not this, but that it's not gold, but whatever. It's not dollars, but you know, it doesn't inflate or whatever. It is actually its own thing. And maybe we'll always just be its own thing that has a role to play. And part of that role is that

When you're building institutions on crypto rails, there's a set of rules that just don't exist. And then there's a set of rules that can only really be coherently written if they are governing on ramps and off ramps, because there are just a lot of things that there's not a protocol native way to implement them. Like there's not a protocol native way to do KYC. So KYC has to happen at the level of

when you change your Bitcoin into USD, we ask, like, why you have that Bitcoin. And maybe there are jurisdictions where you change your Bitcoin into the local fiat currency and nobody has any questions whatsoever. So I don't know how stable that system is because it does end up being a system where some of the dirty money tries to opt its way into the crypto system. But then you have cryptocurrencies

crypto native institutions that want to have a presence in the developed world and have to be compliant. So they have to set up their own guardrails for how do we make sure that we get the benefits of crypto at the technological level, but we don't have the risk of this technology simply does not support

Yeah.

And I don't like personally fully subscribe to that kind of like belief system. But there were some similar arguments where he was basically saying, hey, like the whole world is fiat. Our art is fiat. You know, like our music is fiat. It's kind of like a very high time preference thing where it's like consume, consume, consume. And part of this has resulted in the cultural implications have resulted from the fact that we've gone off of a sound money standard. And I think there are elements of truth there. I will say, too, on the like we are 15 years into the Bitcoin experience and, you know,

I mean, if we would have asked you when you were messaging Nick Szabo or commenting on his paper, like, you know, how far the Bitcoin experiment would actually go. The fact that there's an actual bill in Congress for a strategic Bitcoin reserve, like whether that passes or not, the fact that it even exists is...

is beyond my wildest expectations and absolutely crazy. And so this goes back to kind of the bubble, the exponential types of time horizons that play out in the boom cycles. I want to ask you this on stagnation though, Berne. So your book, the central thesis of the book is basically the problem right now that we're facing is stagnation. You bring the reasons why and the evidence as to where we see it.

And you say the solution is maybe be more embracing of these boom cycles, right? Boom cycles are good. They've been painted as bad and they're actually good. Maybe we'll get to that toward the end too. But I want to ask a question maybe to push back on the case for stagnation, right? It's like we are not completely flat. We are at least we are still growing, right?

And there are those who would make the case in the deacceleration community, let's say, that some of the technologies that we are taking out of Nick Bostrom's urn, you know, he's got this analogy of an urn, a civilization like takes these different balls out of an urn.

and you don't know what exactly the implications or the power of the technology you're taking out. There could be technologies that are not impactful, don't cause any harm. There could be like gray balls that could go either way. And there could be black balls where you just like take it out and it destroys all of civilization, humanity. We've got some pretty powerful technologies that we've unleashed in the 20th century, including nuclear, of course, but then artificial intelligence as well, biotech, you know, nuclear could cause the annihilation of the planets, right?

If that goes wrong, we could create a civilization-ending virus. AI, we've had people like Eliezer Yudkowsky on who tell us that basically the track we're on, AGI, is going to come eliminate all of human civilization and go jet off and build its Dyson spheres. Anyway, the stakes are higher now. And so when you're saying like accelerate, booms, embrace it, like more innovation, are you discounting like...

the risk that this could actually pose, the civilizational risk. And so a few tech entrepreneurs are willing to take these risks because they get all of the upside, but the costs are socialized. What happens if one of these godlike powers actually impacts all of human civilization in a pretty severe way? And that's kind of like a game-ender. So what's wrong with being cautious? A little bit of stagnation could be a good thing. All

All right. Here we go. Okay. Yeah. So that is true. And I've read, you know, fairly cogent arguments for this. I thought the book Fully Grown by Volrath did a pretty good job of laying this out. And the book's argument is, yeah, at some point we have actually a, you know, good enough economy. It's not going to grow that much more. And that's just the natural state of things is that we grow the economy for a while and then we run into these hard constraints and we can't really grow it anymore. And that's

That's it. And, you know, by historical standards, we all have really, really nice lives materially. Like, there are a lot of illnesses that would have just been game over and, you know, in the historical times. And now it's either you don't get the illness because you've been vaccinated or you go to urgent care, you get patched right up. Or, you know, maybe you do actually have very expensive treatments that you require. But those treatments were a rich enough society that we can afford them. And again, they wouldn't have existed before. So, like, would you rather die maybe now?

Maybe you would. Maybe there are cases where, yeah, between the cost and the suffering involved, it's actually not worth it. But I think that is a coherent argument to make. But it's also an argument that I think is too optimistic about the sustainability of the status quo. And I

I think that modern history, especially for Americans and Australians, actually, leads us to wildly exaggerate just how permanent this stuff is. So America and Australia are pretty unique in that we haven't had our society pretty much completely collapse after some kind of disaster, whether it's a war or a revolution or something, in living memory.

If you treat America as the location and, you know, look far back enough in history, then you absolutely do have just total civilizational collapse, you know, pandemic and war and all sorts of misery. But that was the other side of European colonization of America. And

You know, so if I look like over my lifetime, the judgment I would make is America is like empirically, we are, you know, populist demagogue proof. Like we had one of those for four years and then we had somebody else and, you know, now the populist is back, but like didn't destroy anything. And, you know, we're Obama proof and, you know, we're George W. Bush proof. And also we're COVID proof. Like, yeah, we were stuck in our apartments. We had to door dash a whole lot for a couple months and

now everything is normal unless you choose not to be normal. We're terrorist attack proof. We're also, you know, launch a bunch of stupid wars proof. Like, all of these things. We're totally fine. We'll roll with the punches. We'll do okay. But over longer periods, like, no country is everything proof. No civilization is everything proof. And we're just the people who have lasted a very long time, but we live on

land, you know, for Americans, we live on land that used to be somebody else's civilization. And they probably felt the same way too. They probably felt like, you know, this has been Iroquois land for as long as anyone I know remembers. And, you know, our creation myth says that there was nothing and then there was us and it's going to be us forever. And, you know,

And then, you know, these people in funny hats show up and they've got these weird wooden sticks and suddenly they demonstrate what those sticks do. And by the way, you know, your buddy is coughing and now you're coughing and now everyone you know is dead. So those existential risks do show up and they hit a lot harder if your civilization does not have some combination of the technological substrate and the physical capital and the organizational ability to address threats and some set of high agency people who are slotted into positions where they can actually survive.

protect the collective and make the hard decisions that have to be made. So, you know, the modern world is doing great, but we have less oil every day, we have less copper, we have less of all of the raw material inputs that we need in order to keep the system running. And I worry that we have lower social trust over time, lower ambition, and these are all just collective resources. Like, you can think of social trust is to America what oil is to Saudi Arabia and Venezuela. Like, it is this large, large asset, it's enormously valuable, and

we can convert it into things that we like to consume. We can convert it into money, convert the money into goods and services, but we do deplete it when we do that. And in the oil and gas case, you can actually measure that stuff, maybe not perfectly, and it's actually kind of weird sometimes to go back and look at the Saudi Arabian reserve numbers over long periods, but it's hard to calculate that stuff. But it's even harder to calculate social trust and what are some of the cascading shifts in social trust. But maybe next time you go to a drugstore and

you know, ask to have permission to buy the deodorant that you used to be able to just pick up off the shelf. Maybe you can ask yourself if we are actually running down our social trust fund and at some point we write the last check, it bounces, and we've got to figure out something else to do. So,

I think that is the existential risk that people who talk about X-Risk don't like to talk about. And I think it is, over really long periods, it's the one that matters. That lots of countries have been conquered by more technologically advanced countries. And so far, we haven't seen a lot of cases of a country completely self-destructing because they adopted a new technology. What we have seen is that it feels like the end of the world to people who didn't adopt that new technology. So, you know, the last couple samurai who are fighting in a very noble, very brave way against...

soldiers of the Japanese government who have firearms. To them, that was the end of the world. That's the existential risk they were fighting, and runaway technological growth did actually end the world. But for the rest of us, no, we've just kind of adapted to a world where we're still human beings, and it turns out that human flourishing is actually a lot easier in a world that is advanced enough to support things like firearms and other things, not just guns. That's not like the telos of humanity is building bigger and better guns. But we did learn to adapt to that. And I think if you

even go back to things like just the rise of agriculture, that to a nomadic hunter-gatherer, this is in some sense the end of the world. It is at least a form of collapse where you lose the territory you live in shrinks by orders of magnitude because instead of you living wherever the hunting is good and just traveling to a new place if you get bored or don't like it or, you know, there are local hostile people or you've killed all the available wildlife, like,

Instead of that, you're stuck in one place because that's where you've planted your grain and you're going to be there until you harvest it and you gradually accrete other things nearby, like your irrigation system. And maybe there are other villagers who buy and sell things, you know, who have other goods that they specialize in. To some extent, that was the end of one world, but it was the beginning of a different world where the people are still anatomically humans and we still have the same human adaptability. We still develop new institutions that make more sense for settled farmers than for hunter-gatherers. And

We keep on iterating. And I think early on, like that technology did create some brittleness and some vulnerability. So like a famine or a drought is a lot worse if you are a settled farmer, because you can't just you can pick up and go, but you're starting from the beginning. Whereas if you're a nomad, then picking up and going is just what you do all day, every day anyway. Yeah.

It does create some brittleness and some dependencies, but it creates just so much more material productive capacity that that eventually offsets things. And so, you know, one story you can tell of just human civilization over the last 3,000 years is that the farmers and farmer-type norms did gradually develop more and more of an edge against the nomads. And then once the world had, on a GDP-weighted basis, mostly adopted those norms—

Then we started to develop a new set of norms because there's a new set of things that are not purely land-driven, so things like manufacturing and trade. They're not purely land-driven. Technology has more of a direct, measurable, immediate impact, and there's just a new attitude towards what do you own, what do you do, what are your social obligations. Even things like family structure makes sense.

The different structures of just how do you decide who is who and who belongs where, etc. These things all change under new technology systems. But again, if one country decides that old ways work fine, we don't like the existential risk of new technologies like the steam engine, so we're going to keep with our old thing, eventually those countries either adapt or they get conquered. And

I think that that is just the nature of things. There is not a stable equilibrium where we all get the fruits of other people's high-risk decisions and we don't have to make any high-risk decisions ourselves. We've all inherited the outputs of good things that our ancestors and that other people in our country and broader civilizational cluster did. We've inherited the outputs of those things. And I think we've actually inherited a responsibility to continue to improve things and pass on something even better to the next generation. And to be cognizant of the risk, this stuff

it is not like any of this stuff is just part of the natural world. MacBooks do not grow on trees. And even apples, they only grow on trees if we select them very, very aggressively over many generations in order to make them delicious. So all of this stuff that we treat as just part of the default, part of the expectation, it is the product of human effort, human ingenuity, and a willingness to take risks and do things that other people think are crazy. And I think it would just be really weird if...

you know, I happened to be born at, you know, in the first time in all of human history since the dawn of time where that was not the dynamic at play. It'd be lucky for me. Like my life would be a whole lot easier, but I don't think it's true. Stagnation is not an option then. I mean, that's the argument that you make in the,

book and the way out is this variance. This way out is kind of the bubble. I think we already established during the conversation why some of the reasons you think that bubbles are actually good. But I don't think that your claim, the claim in your book is that all bubbles are good. That's right. Or at least you say that some are better than others. Like, how do you distinguish between a bubble that's like ultimately productive, something like crypto or something like Bitcoin or...

you know, the railroad or a number of like Moore's law, for example, the transistor boom, railroads, all of these would be good bubbles under your rubric and things that are maybe like more destructive, maybe less good. So people think about this also a bubble, the housing bubble, let's say very, you know, purely financial bubbles that we've seen throughout history. What's a good bubble versus a bad bubble? So the taxonomy that we outline in the book,

And it does require judgment calls, but in a lot of cases, you can make that call pretty definitively, is that you can break bubbles down into two different categories. There's one category that is what we've mostly talked about today, that you're basically doing applied science fiction. Venture capital is like, it is a branch of applied science fiction where your deal memo is saying, here's this new technology. Let's imagine all the cool things that could happen if this existed. But you don't just write a memo, you also write a check. That's such a cool

way to think about it. I guess this is a sci-fi, like crypto has been a sci-fi podcast all along, I suppose. I mean, one of the reasons I was primed to be interested in crypto was that I'd read Cryptonomicon, and so I had all these ideas about what a digital currency is. And then, like, the book also kind of messed some things up because a lot of the book revolves around this question of why is money worth something? And I don't want to spoil too much about the book, but they do not assume that a cryptographically secure digital currency would be just backed by speculative demand. They have to work some other stuff into there. But anyway, so

You do have this set of bubbles where someone like Jeff Bezos...

uses a web browser, asks himself, okay, what are the things that we do today that would be totally pointless if everybody had one of these on their desk and if this was a default way for people to communicate? And we realized, okay, a catalog of books that a book wholesaler has. That is probably in a SQL database, and you can represent a SQL database. You can represent different database queries at different web pages. So this is pretty easy. We'll slap an HTML frontend on a thing that already exists and

Now we have something new and different. And now we can rethink how people shop and how they buy first books, eventually everything. And there are a lot of implications to work through. And so there's a lot of cool stuff you can speculate about. And then there's another category of bubbles. And I think the housing bubble is a really strong contender for, you know, the classic instance of this, where you're not asking, how could the future be radically different? You're not asking, what changes everything? You're saying, actually, how could the future be pretty much the same, only there's a little bit more of it? Like,

Imagine a world where Las Vegas has a slightly larger footprint. The suburbs extend a little bit more. And private equity often has those dynamics. These bubbles, they can still add value, but they do a lot more of just the pulling forward of investment and the financial engineering to produce returns rather than producing more real-world value and capturing some of the returns that way. A private equity firm that does a deal is often looking at this company and saying, well, what if it did exactly what it did but charged a little bit more money instead?

and was able to trim a few costs. And maybe some of those efficiencies are actually value creating. And some of them, they're a value transfer where the company was maybe offering customers a slightly better deal than it strictly had to, and maybe offering employees, again, like a slightly better deal than it really had to. And if you really tighten things up, the company could be a little bit more profitable without producing that much more of value for the rest of the world. And

Like a private equity firm, when they're thinking about the long-term future, if they're asking themselves, how could the future be radically different, that's how they underwrite their risks. They're not generally betting on totally different future that they're actually going to profit from. Or if they do, like they want to get involved when they're at a point in the S-curve that makes it a little bit easier to extrapolate the next couple steps. So-

One way to look at that is that you have extrapolation bubbles where you say, here's a change that actually causes this inflection point in history and what happens on this new branch of the timeline. And then the other bubbles, you're sort of interpreting the past. You're being like, well, what if we could predict things we already know with slightly more refinement? And what if we could underwrite a little bit more precisely? What if we just scale up things that already exist? And a lot of economic activity and a lot of economic growth is refinement.

scaling. It is taking things that exist and doing a little bit more of them and making it a little bit better. But that still requires there to be the thing that you are actually scaling. And so our ceiling, our asymptote for GDP per capita is going to be based on what are these fundamental transformative technologies. And so going back to the point about bubbles and building things that would otherwise not get built, in retrospect, you can often see this where you say that

I don't know, ChatGPT probably would not have gotten built if you didn't have this confluence of enthusiasms. But when you look at suburban Las Vegas and you're like, well, this house that's identical to this other house over here would only have gotten built if there were enormous demand for the AAA trenches of subprime-backed CDOs.

Not super exciting. And it will warm your fiat-hating hearts to know that often those bubbles, the bad bubbles, they are induced by some combination of fiscal and monetary policy, usually more on the monetary side, where there's a lot of credit creation, interest rates are low, the money has to go somewhere. And so people look for something that is low risk but still produces a return above treasuries. And that often means just trying to find some narrow slice of the economy that you could financialize a little bit more.

And I do want to make sure that I make it clear, like, I find finance really, really fun. I've worked in the sector. I like it a lot. I do think that we invest a lot of resources in that that could be invested elsewhere and that maybe, you know, people like me probably do contribute some level of instability to the overall system. And, you know, we're certainly not curing cancer or anything in our day jobs. So, yeah, we might be an example of misallocated capital or we might be an example of just, like, in a modern complex economy, it is just really hard to trace how

any one person's job actually creates value for all of society. And that is why you have a price system, is to figure out, well, if someone thinks this is worth paying to do, then either they're right and it's just their local knowledge tells them something that you don't know, or they're wrong and they're wasting their money, in which case their vote on how the economy works gets diminished over time because they're not actually responding appropriately to economic signals.

So I don't worry all that much about the misallocation of labor things. I do think it is largely self-correcting over time. But I think if we had a system that maybe makes finance a little bit more boring and eliminates some of the fun stuff that

probably the people who are in finance because it was fun, if they get bored, they'll find other ways to keep themselves entertained. And probably those other ways are more likely to lead to one of those zero to one technologies. Yeah. I mean, you talk about bubbles as kind of an outlet for all sorts of cultural expressions and even kind of like, you know, searches for meaning. Bankless Nation, there's so much more in this book, Boom, that we have not covered yet.

And I really encourage you to read it. It's the most compelling case for bubbles and it's much deeper than just kind of like the financial side of it. The book gets into kind of the cultural and spiritual sides of it too. Anyway, it's just a, yeah, fantastic book. I really enjoyed it. Maybe as we close this out, Bern, one of the things that the book left me with is sort of reframing bubbles almost as like childhood dreams, if that makes sense. Like what are the things you really hoped for when you're reading that sci-fi book when you were like, you know, a 10 year old kid?

Right. And you end the book with some speculation on like where the next bubbles might be, like the infinite frontier of space. Like Elon Musk has sort of a bubble under Burns definition, which is like getting to Mars. You know, that's kind of a bubble type of aspiration or the project of crypto, which is incorruptible money and incorruptible property.

digital rights. That is kind of a bubble type material because it's so ambitious in its stream. There's immortal life as well. We could get into like future, you know, like biotech bubbles. And maybe we haven't seen these because they've been somewhat repressed due to safetyism culture and

regulation and also energy as well. These are all topics. But in general, what advice? I mean, I think people listening to Bankless like right now have gotten in at some level on the crypto bubble or the series of crypto bubbles. What advice do you have for like identifying the next thing? Because we want to be at the forefront not only of, you know, crypto and this new monetary technology, but on other bubbles. Like, I mean...

The internet was so exciting seeing that evolve, you know, mobile platforms are so exciting seeing that evolve, watching crypto evolve in my lifetime. There's going to be more now we're in the midst of sort of AI. What are some of the patterns that we might find in order to kind of identify bubbles? And I think your encouragement is really just like FOMO into them, like get in early. But yeah, what would you say as we part? Right. So there is this interesting thing where a lot of the people who get involved really early, they...

they get involved before it's a thing with a name. It's just, they have an interest. They realize that there is something that other people aren't paying attention to, but they can't stop thinking about. And, you know, sometimes that is just like, you know, someone gets really obsessed with the 30 years war and reads every single book they can about it. And that's just their obsession for a while. Okay. But sometimes that kind of obsession does start guiding you towards other questions. And you start like asking what is so interesting about this? Like what are other people not getting? And sometimes,

Sometimes it's going to require a lot of patience. So there were people like the crypto mailing list where Satoshi originally published the white paper, like they've been talking about this stuff for a really long time. And they've been talking about it adjacent to a lot of other ideas around privacy and anonymity and communications and trust and privacy.

It just turned out that when you think about the question of how do you take a stream of bits and transmit it to someone such that no third party could intercept it and read it, you can answer that question, you know, like by writing some C.

Or Pearl or whatever. But it also raises a bunch of questions about like, what does that mean? And like, what if we end up in this world where we're all communicating pseudonymously and like maybe you're friends with the same person three times over in three different pseudonymous pairs and neither of you know that the other person is a friend? Yeah.

And like it raises all these really interesting questions. And I think the more that you can think about a very different world that would exist if this technology were perfected or were widely deployed, then I think it's worth continuing to do the work and continuing to have it as a hobby. I think a lot of those kinds of hobbies are just intuition pumps for other more day-to-day practical things. And then, yeah, like when you start to see these things

get funded, you start to see people work on them, and you feel like it's too late. It's probably not too late. Marc Andreessen gave this really funny interview many years ago where he talked about how he'd been at college, he'd been working on Mosaic, and he decided to move to Silicon Valley, and it was like 1994, and he thought that he'd moved there and missed it. He thought that, like,

software, like tech, it was this thing that happened in the 80s and the early 90s, and then it stopped. And everyone lost their jobs, and we all realized that these companies were kind of speculative, and maybe there wasn't really end demand for them. And so when you dive in, you want to dive in because it is the chance to take what you're doing and actually make it real and scale it. But

It's important for this to be something that you actually believe in beyond the purely financial standpoint. Now, one of the things we talk about in the book is that a lot of these bubbles do bring together people with very different motivations. So if you look at crypto, for example, you have people who really like the underlying technology, you have people who really like the politics of it, and you have people who really, really want to make a lot of money.

Now, you don't really have to give advice to the people who are just in it for the money because the advice would be find something else you can just be in for the money. And that's already what they do. So like there's no point in doing that. It's like if I told my dog, like if someone knocks on the door, please bark. Like my dog did not need to hear that. That's what he does. So those people don't need the advice. But I think for people who genuinely believe in the underlying technology,

It is really painful to go through this cycle where you really get your hopes up. Like, this is it. Crypto is going to happen. We are going to replace the Fed and we'll build a new system. Knowing what we know now today, it will be as if money had been invented after computers instead of the other way around. And so, like, we know all of the flaws. We know what we could do better this time. Like, you think that and then...

crypto prices drop 80% and a bunch of the companies shut down, etc. And you feel like it's over. But then if you still feel like you were genuinely interested in the technology, like you wanted to make this happen, then sometimes it can just clear your head a little bit to realize we're not in this race to maximize hype. We're not competing against purely mercenary people. Those people have all left.

and all of the completely insane risk seekers have gotten margin called down to zero and they're gone too. It's just us hardcore technologists and it's finally quiet enough to think. So that's when a lot of the infrastructure for the next big boom gets built is in this aftermath where people have built some of it, they built it sloppy, they've got to refactor it. They have a smaller headcount, but now it's a smaller headcount of true believers, fanatics, like people who see that 80% drawdown in their net worth and think,

okay, that was interesting, but maybe it's not the all-time high until it's the all-time high. So we'll keep going. So I think that is something to remember, is that there's a big cycle. There are epicycles within that. There were times when people thought that it was over when it wasn't over yet. And so you do want to treat the bubble as a signal that now is the time to work, but you don't want to treat a price collapse as a signal of it was never going to work. That's just a signal of

These things are volatile. There's a lot of uncertainty. A bubble is an attempt to price in a very different future from the present. And so, of course, you have a very wide confidence interval for what that future can look like, how valuable it can be, and also who collects that value. And I think there is some just like nobility basically in working on something that produces a lot of value for the world and just not being the person who captures most of that value. It happens sometimes. Like getting really rich is partly a matter of skill. There is also definitely a luck component involved.

And you can't over-index on either one of those when making your decisions. Well said, Byrne. This is fantastic. If there's one thing I could add, going back to the comment of Marc Andreessen moving to Silicon Valley in 1994 and thought he was late to the internet, he thought he missed it, is when you see kind of these bubbles in these frontier technologies, there can be multiple eras of the same technology. I mean, look at how many eras the internet has gone through already.

And particularly when two bubbles meet, two sort of frontier technologies meet, when you had the internet and you had mobile platform and that met in the iPhone. And we had that whole series of innovation. One thing I think is interesting in 2024 crypto is you might say, look, well, Bitcoin's gone from zero to 100K. I'm late. It's 2024. I'm late. And yet we are just at the early stages of seeing a very interesting technology intersect with crypto, which is AI and AI agents.

And what magic will this make together? We don't know yet. And it is early on that section of the history. So at some level, the bubble never ends and you have to position yourself in the right spot in the right time to maximize this. And I think that was a big takeaway, a very big practical takeaway I got from your burn. So the book is called

Boom. We will include a link in the show notes for you, Bankless listener. This is a fantastic reading. And Bern, thank you so much for joining us and guiding us through the conversation today. Absolutely. Thank you for having me. Bankless Nation, got to let you know, bubbles are a little bit risky. What goes up comes down. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.